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Breach of the Lease where does company law state they cant be directors in this case?

Breach of the Lease where does company law state they cant be directors in this case?

23-04-2019, 20:04 PM

Hello, Hope you all had a lovely Easter! My question is....can directors who are in breach of their own Lease and are not following the Lease be removed and what company or Landlord and Tenant law would support this?

If a director of a big conglomerate is in breach of a lease for their private home, it is totally irrelevant. I believe you mean directors of an RTM or RMC, for which they are also leaseholders.

This is not a matter of statute of law. Landlord and tenant law doesn't really address companies, except for RTMs, and Company Law does address leaseholds. They can only be removed if the company articles say they can be removed, and I suspect such clauses are rare, especially given that most leaseholders are probably in breach on minor issues.

Some RMCs have a condition that the director must be a leaseholder (RTMs cannot). In that case successful forfeiture of lease would remove them as directors. If the breach was in relation to payment and the director was made bankrupt, that would also remove them form all directorships. As RTM directors don't have to be leaseholders, there will be a lot of them who could not breach the lease, anyway.

I'm guessing this isn't really a new thread but part of a series trying to get round the basic problem that the only way of dealing with bad directors is for a majority of shareholders to vote them out and replace them with good ones.

Comment

No I mean Directors of a limited company acting on behalf of the company as its agents and the shareholders? The directors are using the company for their own benefit and not following the Lease, their argument is we own the freehold, we are the directors we do what the majority agree with, however when I try to point out we have a Lease and we need to follow the Lease they dont agree with me.

Comment

Company law says nothing about obeying leases. Companies can and do breach contracts, which is all a lease would amount to.

Section 175 onwards of the 2006 Companies Act deals with conflicts of interest, although they can be overridden by the company's articles, for example to allow the sort of conflict of interest that is inevitable because of the nature of the company.

If I understand section 178 correctly, they can only be enforced by civil actions taken by the company itself, so you will need control of the company first. Once you have control, it is unlikely that it will be worth suing the (ex-)directors.

I cannot find any relevant criminal offences in schedule A.

Back to RMCs and RTMs, unfortunately a lo lot of people seem to advise such companies that they can ignore the lease. Breaching a lease is not a criminal offence.

Comment

You need to enforce the lease against the company, not the directors. If it involves misuse of service charges, start with the FTT. Otherwise you will probably need to go to the County Court using the standard track and seek an injunction. If the directors breach an injunction the courts may decide to disqualify them.

Comment

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